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Regulation and private sector investment in infrastructure - evidence from Latin America

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  • Pargal, Sheoli
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    Abstract

    The author assesses the importance of the regulatory framework as a determinant of private sector investment in infrastructure. She uses recently compiled data on private and public sector investment in the water, power, telecommunications, railroads, and roads sectors between 1980 and 1998 in nine countries in Latin America. The author finds that the most significant institutional determinant of private investment volumes is the passage of legislation liberalizing the investment regime. This is important because it indicates that the legal basis for reform is probably more critical in determining the quality of the investment climate than specific aspects of the institutional framework governing private sector participation. In accordance with intuition, the author's results indicate that government action to increase regulatory certainty and minimize the perceived risk of expropriation through the establishment of independent regulatory bodies is a critical determinant of the volume of private investment flows. She also finds that the general relationship of private to public investment is one of substitutability.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3037.

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    Date of creation: 30 Apr 2003
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    Handle: RePEc:wbk:wbrwps:3037

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    Related research

    Keywords: Economic Theory&Research; International Terrorism&Counterterrorism; Payment Systems&Infrastructure; Decentralization; Environmental Economics&Policies; Trade and Regional Integration; ICT Policy and Strategies; Legal Products; Environmental Economics&Policies; Economic Theory&Research;

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    1. Wallsten, Scott, 2002. "Does sequencing matter? regulation and privatization in telecommunications reforms," Policy Research Working Paper Series 2817, The World Bank.
    2. Kerf, M. & Gray, R.D. & Irwin, T. & Levesque, C. & Taylor, R.R. & Klein, M., 1998. "Concessions for Infrastructure. A Guide to their Design and Award," Papers 399, World Bank - Technical Papers.
    3. Pritchett, Lant, 2000. "The tyranny of concepts - CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital," Policy Research Working Paper Series 2341, The World Bank.
    4. Dailami, Mansoor & Leipziger, Danny, 1997. "Infrastructure project finance and capital flows : a new perspective," Policy Research Working Paper Series 1861, The World Bank.
    5. Serven, Luis, 1996. "Does public capital crowd out private capital? : evidence from India," Policy Research Working Paper Series 1613, The World Bank.
    6. Warrick Smith, 1997. "Utility Regulators : The Independence Debate," World Bank Other Operational Studies 11570, The World Bank.
    7. Warrick Smith, 1997. "Utility Regulators : Roles and Responsibilities," World Bank Other Operational Studies 11571, The World Bank.
    8. Trujillo, Lourdes & Martin, Noelia & Estache, Antonio & Campos, Javier, 2002. "Macroeconomics effects of private sector participation in Latin America's infrastructure," Policy Research Working Paper Series 2906, The World Bank.
    9. Ian Alexander & Timothy Irwin, 1997. "Price Caps, Rate-of-Return Regulation, and the Cost of Capital," World Bank Other Operational Studies 11575, The World Bank.
    10. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
    11. Reinikka, Ritva & Svensson, Jakob, 1999. "How inadequate provision of public infrastructure and services affects private investment," Policy Research Working Paper Series 2262, The World Bank.
    12. Serven, Luis, 1997. "Irreversibility, Uncertainty and Private Investment: Analytical Issues and Some Lessons for Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 229-68, Supplemen.
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    Cited by:
    1. Stern, Jon & Cubbin, John, 2005. "Regulatory effectiveness : the impact of regulation and regulatory governance arrangements on electricity industry outcomes," Policy Research Working Paper Series 3536, The World Bank.
    2. repec:idb:brikps:55178 is not listed on IDEAS
    3. Kirkpatrick, Colin & Parker, David & Zhang, Yin-Fang, 2004. "State versus Private Sector Provision of Water Services in Africa: A Statistical, DEA and Stochastic Cost Frontier Analysis," Centre on Regulation and Competition (CRC) Working papers 30604, University of Manchester, Institute for Development Policy and Management (IDPM).
    4. Kirkpatrick, Colin & Parker, David, 2004. "Regulation and the Privatisation of Water Services in Developing Countries: Assessing the Impact of the General Agreement on Trade in Services (GATS)," Centre on Regulation and Competition (CRC) Working papers 30600, University of Manchester, Institute for Development Policy and Management (IDPM).
    5. Stern, J. & Cubbin, J., 2004. "Regulatory effectiveness: the impact of regulation and regulatory governance arrangements on electricity industry outcomes: a review paper," Working Papers 04/01, Department of Economics, City University London.
    6. Nagayama, Hiroaki, 2010. "Impacts on investments, and transmission/distribution loss through power sector reforms," Energy Policy, Elsevier, vol. 38(7), pages 3453-3467, July.
    7. Cubbin, J. & Stern, J., 2004. "Regulatory effectiveness: the impact of good regulatory governance on electricity industry capacity and efficiency in developing countries," Working Papers 04/04, Department of Economics, City University London.

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